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Scotia Economics' Provincial Auto Sales Outlook - It's Still Best in the West

TORONTO, Feb. 29 /CNW/ - Vehicle sales in Western Canada climbed to a
record high in 2007, and purchases will be 'Best in the West' once again in
2008, according to the latest Global Auto Report released today by Scotia
Economics.
"Preliminary data for January indicate that vehicle purchases across
Canada began 2008 on a strong note, led by a 27 per cent year-over-year surge
in Saskatchewan and Manitoba," said Carlos Gomes, Scotiabank Senior Economist
and Auto Industry Specialist. "We expect vehicle sales in Western Canada to
reach new heights in 2008, led by Saskatchewan and Alberta. However, purchases
are likely to weaken in Central Canada, as more than 80 per cent of the
region's exports are destined to the United States.
"In fact, we expect declining vehicle sales in Central and Atlantic
Canada to reduce overall Canadian purchases to 1.61 million units in 2008,
down from 1.65 million in 2007, but in line with the 1.60 million-unit average
of the past five years," added Mr. Gomes.
Passenger vehicle sales in Alberta climbed to record 249,000 units in
2007, and are expected to reach a high of 251,000 units this year, up from an
average of 194,000 over the past decade. However, after average annual gains
in vehicle sales of nearly 10 per cent since 2005, the increase will moderate
to a low single-digit gain, as the deferment of some high profile oil sands
projects and deteriorating housing affordability have started to lead to some
migration out of Alberta.
Many of the households leaving Alberta are moving to Saskatchewan,
lifting the population above one million. This inflow will help the province
post the strongest sales gain in 2008, with vehicle purchases expected to
reach 45,000 units, the highest level since 1986, and up from an average of
roughly 40,000 over the past five years.
"Saskatchewan's economic outlook is being boosted by record prices for
grains, such as wheat, corn and canola, which lifted farm income by 15 per
cent in 2007," said Mr. Gomes. "A further double-digit gain is expected in
2008, as global wheat stocks are at a 30-year low. Surging mining activity,
particularly potash and uranium, is boosting employment in resource
extraction, while energy is also supportive."
After reaching record sales of 197,000 units in 2007, purchases in
British Columbia will remain largely flat this year, as strong construction
activity is offset by difficult conditions in forestry and in manufacturing,
especially wood and paper which account for one-third of overall shipments,
and are in the midst of the sharpest decline since the economic downturn of
2001.
Manitoba also continues to enjoy robust construction activity, and is
benefitting from high commodity prices, especially nickel. However the
slowdown in goods-producing industries which account for 25 per cent of
overall employment in Manitoba should pull vehicle sales down to 44,000 units
this year, marginally lower than in 2007, but in line with the average since
2003.
Ontario leads sales downturn
After a largely flat performance in 2007, vehicle sales are set to
decline in Central Canada this year. The region's loss of economic momentum is
directly linked to falling demand in the United States, which is the
destination for more than half of Central Canada's total economic activity.
"Despite ongoing strength in Ontario's service sector, which accounts for
more than 70 per cent of overall employment, a broadening of weakness beyond
manufacturing will reduce employment growth to less than one per cent in 2008,
the lowest level since the early 1990s," said Mr. Gomes. "This should reduce
vehicle sales to 566,000 units in 2008, from an average of 600,000 over the
past five years."
In Quebec, prospects for vehicle sales are also being weighed down by
weaker exports. The province's major export industry, forest products,
experienced a 15 per cent contraction in exports in 2007 and has eliminated
roughly 10,000 jobs over the past two years. In contrast, activity is strong
in the aerospace sector, but competitiveness is being undercut by Canadian
dollar appreciation. As a result, vehicle sales in Quebec are likely to
decline to 393,000 units in 2008, from an average of 407,000 over the past six
years.
In Atlantic Canada, softer employment growth will reduce vehicle
purchases to 115,000 units in 2008, from a twenty-year high of 118,000 last
year. However, volumes should outperform in Newfoundland &amp; Labrador. A
brightened outlook in the province's energy sector has bolstered consumer
confidence.
"Sales should also remain strong in Halifax, the financial hub of
Atlantic Canada," said Mr. Gomes. "Unemployment in Halifax fell to only
4.5 per cent in January, the lowest level on record in data back to 1987, with
employment buoyed by service sector gains."
Scotia Economics provides clients with in-depth research into the factors
shaping the outlook for Canada and the global economy, including macroeconomic
developments, currency and capital market trends, commodity and industry
performance, as well as monetary, fiscal and public policy issues.